What Critical Minerals Should Be Part of Your Risk Management Strategy?

Article Highlights:

• The U.S. Department of Energy defines critical minerals as any material that “(i) has a high risk of supply chain disruption; and (ii) serves an essential function in one or more energy technologies, including technologies that produce, transmit, store, and conserve energy.”
• Rare earth elements, meanwhile, are a set of 17 metallic elements—the 15 elements in the lanthanide series on the periodic table, plus scandium and yttrium—that have a wide range of applications in high-tech manufacturing.
• The top five critical materials organizations should focus their SCRM efforts include cobalt, gallium, graphite, lithium, and nickel.

Dating back to the first year of the Biden administration, in 2021, the U.S. government has been acutely aware of the risks underpinning America’s critical materials supply chains. An assessment by the Biden administration, ordered during the president’s first year in office and released in 2022, found that the U.S. was overly dependent on its adversaries for a wide array of critical minerals and materials. Further, a companion report issued by the Department of Energy pointed to how China’s first-mover approach had helped it gain a competitive advantage over its rivals in controlling large swaths of the global critical materials supply chain. Countries like China “have adopted coordinated, government-led strategies and industrial policies to advance and unlock significant investment in key supply chain segments.”

While the U.S. government may be angling to achieve some measure of critical mineral independence from geopolitical rivals like China, America still has a long way to go. In the meantime, U.S. businesses that rely on critical minerals and rare earth elements (REEs) for their manufacturing processes should start implementing risk management measures to protect those supply chains now. But there are 50 critical minerals, according to designations from the U.S. Geological Survey, as well as 17 rare earth elements. How can organizations determine the materials most in need of a robust risk management framework? In this article, we run through the five materials that sourcing and supply chain resilience professionals should be paying the most attention to. 

What Are Critical Minerals?

Given their strategic significance for U.S. industry, defense, and national security, among other applications, the U.S. Department of Energy provided its own definition of a critical material in its 2020 Energy Act. The agency defines the materials as “Any non-fuel mineral, element, substance, or material that the Secretary of Energy determines: (i) has a high risk of supply chain disruption; and (ii) serves an essential function in one or more energy technologies, including technologies that produce, transmit, store, and conserve energy.”

In order to be deemed critical materials, a substance needs to both serve an essential function and be vulnerable to supply chain disruptions. IN 2022, the U.S. Geological Survey (USGS), acting under the Department of the Interior, published a list of materials that the agency deemed to be critical minerals. The following 50 substances fit the above definition of “critical minerals”:

What Are Rare Earth Elements?

Rare earth elements, often abbreviated as REEs, are a set of 17 metallic elements—the 15 elements in the lanthanide series on the periodic table, plus scandium and yttrium—that have a wide range of applications in high-tech manufacturing. Due to their unique chemical properties, rare earth elements are used as magnets, catalysts, and battery alloys in consumer electronics, renewable energy technologies, electric vehicles, and medical devices. While these products may only utilize trace amounts of REEs, those ingredients are essential to performance and functioning. Just because a rare earth element represents a tiny percentage of a good’s weight or monetary value, in other words, doesn’t mean that the material can be easily discarded or replaced.

The Rare Earth Elements

• lanthanum (La)
• cerium (Ce)
• praseodymium (Pr)
• neodymium (Nd)
• promethium (Pm)
• samarium (Sm)
• europium (Eu)
• gadolinium (Gd)
• terbium (Tb)
• dysprosium (Dy)
• holmium (Ho)
• erbium (Er)
• thulium (Tm)
• ytterbium (Yb)
• lutetium (Lu)
• scandium (Sc)
• yttrium (Y)

Rare earth elements have been a particular category of concern for the U.S. government because of the way China has come to dominate production in the 21st century. According to USGS, in 1993, 38% of the total global production of all REEs was in China, while 33% was based in the U.S. (Australia was responsible for another 12%). Over the next two decades, however, those proportions underwent a dramatic transformation. By 2011, China accounted for 97% of the total global production of REEs. 

Rare earth elements have been a particular category of concern for the U.S. government because of the way China has come to dominate production in the 21st century.

While that figure has declined more recently—China accounted for 69% of worldwide REE production in 2023—the nation retains an ironclad grip over much of the rare earth element supply chain. 

The Five Critical Minerals Indispensable to Your SCRM Strategy

Cobalt (Co)

• Primary Uses: Rechargeable batteries; hard drives and electronic components; superalloys used in aerospace and defense vehicles, rocket motors, and power plants.
• Percentage Processed in the U.S.: <1%
• Top Global Producer: Democratic Republic of Congo (DRC)

Cobalt is a unique material because of how essential it is to a slew of different products and manufacturing processes. Due to its high energy density and thermal stability, the transition metal is used in semiconductors and lithium-ion batteries. In addition, its advantageous mixture of properties also make it an invaluable material for superalloys used in the aerospace, defense, and heavy machinery manufacturing industries. 

In addition to its criticality to a range of sectors, cobalt should be one of the first critical minerals covered in an SCRM framework because of its risky supply chain. The metal is primarily mined in the Democratic Republic of Congo (DRC) a politically unstable nation with a checkered history of violence, worker exploitation, and child labor. A 2023 article published by the Yale School of the Environment characterized mining operations in the DRC as “militia-controlled areas…where five-year-old children wielding crude shovels and scraps of rebar represent the bottom of a global supply chain that ends on the factory floors of some of the world’s richest and most powerful companies.” Further complicating matters is the fact that much of the cobalt mined in the DRC subsequently travels to China to be processed and refined. 

China has ownership stakes in a significant number of DRC cobalt mines, and nearly three-quarters of all cobalt is ultimately refined in the country. 

Lithium (Li)

• Primary Uses: Lithium-ion batteries used in a wide range of electronics; electric vehicles (EVs); glass and ceramics; cement formulations. 
• Percentage Processed in the U.S.: <1%
• Top Global Producer: Australia

An alkali metal with an extremely low density, lithium’s chief application is for rechargeable batteries used in everything from smartphones and laptops to EVs. Lithium ions make rechargeable batteries possible by moving between the anode and the cathode, two critical components of a battery. As the U.S. Department of Energy explains, “While the battery is discharging and providing an electric current, the anode releases lithium ions to the cathode, generating a flow of electrons from one side to the other.” When the battery is plugged in, meanwhile, “the opposite happens: Lithium ions are released by the cathode and received by the anode.”

Australia is the world’s largest producer of lithium, followed by Chile and China. But as with a slew of other critical minerals, China dominates the refining process: the country processes over 70% of the world’s lithium. Because of the integral role the metal is set to play in the transition from internal combustion engines (ICE) vehicles to EVs, China’s disproportionately large role in the refining process should be concerning to U.S. businesses and manufacturers. Organizations that anticipate growing demand for lithium might want to examine their minerals supply chain and consider pursuing sourcing opportunities outside of China. 

Graphite (Gr/C)

• Primary Uses: Batteries and electrodes; electric motors; fire retardants; blast furnaces (“refractories”). 
• Percentage Processed in the U.S.: None
• Top Global Producer: China

Naturally occurring in black crystals and crystalline masses, graphite is a stable form of carbon with a unique mixture of properties that make it valuable to a slew of fields. The element’s chemical and thermal stability, as well as its high electrical conductivity, are useful in the metalworking, aerospace and defense, and automotive industries. Within the electronics supply chain, graphite serves as a key ingredient in batteries, electrodes, circuit boards, and various interconnect, passive, and electromechanical (IP&E) components. 

China is the worldwide leader in graphite production at both the mining and refining levels, giving it a potent stronghold in the critical mineral’s supply chain. Other major producers include India and Brazil, as well as African nations like Mozambique and Tanzania. While the U.S. has not processed graphite domestically since the 1950s, the U.S. Geological Survey (USGS) has found graphite deposits in a number of states, including Alaska, Colorado, Montana, Pennsylvania, and Texas. While those graphite reserves provide potential for domestic mineral production sometime in the future, presently U.S. manufacturers are still dependent on supply chains that travel through China. 

Nickel (Ni)

• Primary Uses: Batteries and electrodes; electric motors; fire retardants; blast furnaces (“refractories”). 
• Percentage Processed in the U.S.: None
• Top Global Producer: China

Nickel is a corrosion-resistant transition metal with material properties that make it critical to a wide variety of products and industries. The metal has a high melting point, is extremely ductile (malleable), and is magnetic below a specific temperature threshold. Nickel is used in everything from metal alloys and aerospace parts to batteries and coatings. According to the Nickel Institute, the element is “essential in hundreds of thousands of products.” While worldwide nickel production came in around 3.7 million tonnes in 2023, demand is estimated to climb by nearly a third—to 4.7 million tonnes—by 2030. 

Indonesia is by far the world’s largest nickel producer, mining nearly two million tonnes annually. Other major producers include the Philippines, New Macedonia, and Russia. According to mining research firm Oregon Group, nickel is currently the object of a global trade war involving Indonesia and Western nations. The organization found that Indonesia has pushed down the price of the mineral by more than 50% over the past two years, in an effort to price out other national competitors attempting to enter the marketplace. 

Gallium (Ga)

• Primary Uses: Semiconductors; solar panels; LEDs; metal alloys.
• Percentage Processed in the U.S.: None
• Top Global Producer: China

A silvery metal with an appearance similar to aluminum, gallium is used in the electronics, aerospace and defense, and energy industries. It’s also a key material in the doping processes carried out in semiconductor manufacturing, and is often added to silicon to modify electrical conductivity and structural properties. Gallium is also combined with nitrogen to create gallium nitride (GaN), a semiconductor material used as a substitute for silicon due to the higher-speed, higher-efficiency chips it produces.

China currently dominates the mining and refining of gallium, with South Korea, Ukraine, Russia, and Kazakhstan also producing significant amounts of the critical mineral. Gallium has already proven to be vulnerable to major supply chain disruptions: in December 2024, China banned the export of the critical mineral to companies based in the U.S., a strategic maneuver that continues to create logistical and manufacturing challenges for American firms. 

Z2Data Can Help Firms Manage Critical Mineral Risk 

SCRM platform Z2Data gives OEMs and other businesses the power to identify the critical minerals they are most reliant on, and where their geographical dependencies are most likely to be. Z2Data offers users two key, overlapping features that allow businesses to understand their risk exposure and implement targeted strategies to mitigate it.

SCRM platform Z2Data gives OEMs and other businesses the power to identify the critical minerals they are most reliant on, and where their geographical dependencies are most likely to be.

• Minerals Detection: The SCRM tool gathers full material declarations (FMDs) and pulls out the critical minerals businesses are relying on to manufacture their products. This gives businesses a valuable baseline for thinking about the scope of their minerals dependence.

• Minerals Database: After identifying minerals present in FMDs, Z2Data is able to cross-reference that information against its own comprehensive internal minerals database. Using this broader context, users can get a strong indication of where their minerals are likely coming from, and their potential exposure to risky suppliers like China, Russia, and the Democratic Republic of Congo (DRC).

Equipped with these insights and intelligence, organizations can start to establish an SCRM framework for their critical minerals, one that may encompass dual sourcing, supply chain diversification, and de-risking away from China. To learn more about how Z2Data can help organizations manage risk in their critical minerals supply chain, schedule a free demo with one of our product experts.